Saturday, April 26, 2008

Who would you get if you were to combine the unadulterated power lust of Boss Hogg, the smarminess of a cheap salesman and the hedonistic vacuity of a hippie? Of course, you'd get Bill Clinton, the First Hippie of the United States.

This post started as an epitaph on the Clinton's political careers, however, given their Rasputin-like powers of eluding political mortality, it would be premature to write them off just yet. Many pundits have wondered aloud why so many not only disagree with the Clinton's' politics but also appear to have a profound hostility towards them. I think the reason is a sense of profound injustice; the same kind of injustice sane people felt when OJ was acquitted. It is the momentary yet overwhelming sense of living in a world with no justice, no outrage, no shame, no sense of decency, no rationality - the sense that something is wrong in the world and there is no one to save it.

Imagine a man that is such a fraud, so prolific as a scoundrel and con artist, and that the evidence of his depravity is so overwhelming that most, unable to conceive the possibility of such extreme wickedness, simply refused to believe it? Would if the alleged litany of nefarious transgressions were so inconceivable, a mere discussion of them could simply be brushed aside as the fantasies and prevarications of a "vast.. [right wing]..conspiracy." The Big Lie is the concept that people are more likely to believe an outrageous lie than a small one. The Clinton's version is that the more outrageous and voluminous your misdeeds, the more likely the public is to dismiss their possibility. Over the course of his administration, as each scandal bled into the next, it simply became more difficult to focus on any one allegation. The public which became desensitized to the scandals, seemed to become more convinced that someone must be out to get them. Clinton, in fact, seemed to get more popular.

What is the root of this injustice? The answer I believe fundamentally is the twisted combination of moral relativism and altruism. Liberals are seen as defenders of the poor and weak and therefore cast as "idealists" who although naive and perhaps flawed are nonetheless well-intentioned. This is the root of popular sympathy for the character of Robin Hood as well as the contradictory idea that socialism is "good" in theory but just difficult to implement in practice as discussed in my post We Would Not Have Killed 1.7 Million People in Our Agrarian Utopia. Moral relativism, embraced by the left, teaches that there is no such thing as right and wrong. Therefore, to a liberal, those who cast judgment are more evil than the perpetrator of evil, and those upholding moral absolutes are cast as self-righteous moralizers.

Because altruism or self-sacrifice is taken by default to be virtuous especially in a Christian context, to the extent that religious conservatives are associated with supporting capitalism, which necessitates selfishness and profit-making, they are rightly seen as hypocrites. This is why rogues like Clinton or Marion Berry can literally get away with murder, rape, and drug use while any Republican is burned at the political stake for the most minor transgression. This is also the root of the popular caricature of Republicans as conspiratorial schemers plotting in dark smoky rooms as against the caricature of leftists as cool hedonists. For example, recall the witch hunt over Clarence Thomas' alleged sexual harassment of Anita Hill compared with the left's dismissal of rape and sexual harassment charges against Clinton who is now mocked openly but as a suave ladies' man not as a card carrying member of the demonic Old Boys network.

Consider also the reaction to the Abu Ghraib debacle. While this was a travesty, the reaction to it in the liberal media was hysterically out of proportion considering the wholesale barbarism practiced by our enemies on a daily basis in the Middle East. The slightest whiff of hypocrisy implicit in any of America's foreign policy actions brings about the kind of outrage one would expect from witnessing the actions of our enemies. So, what was the liberal reaction when the Muslims beheaded Daniel Pearl, or put the fatwa on Salman Rushdie, or rioted and killed in response to the Danish caricatures of Muhammad? What was the liberal reaction when the Muslims danced in the streets after 9/11, or when they glamorize and reward suicide bombers, or when they sentenced a woman to prison for being the victim of a gang rape? The reaction from the Left, as always, was silence.

Of course, this moral relativism does not stop them from judging the United States or capitalism. This is simply evil.

There is another aspect to the Clinton's which I believe explains them at a more fundamental level. Much has been written about the Clinton's, especially the volatile and diabolical combination of Bill's pathological need for approval from others and his inner rage deriving from his alcoholic father. Rather than psychologizing about them, it's more instructive to analyze the philosophy of the hippie. In Ayn Rand's essay "Apollo and Dionysus"(see The Return of the Primitive: The Anti-Industrial Revolution) she compares the underlying philosophy of the lunar landing with that of the Woodstock music festival which both occurred in the summer of 1969. The following excerpt captures the philosophic disposition of the hippy generation and thus of the young Clinton's in their formative years. I will not even attempt to add anything to this. She writes:

The hippies are wrong, however, when they fancy themselves to be rebels. They are the distilled essence of the Establishment's culture, they are the embodiment of its soul, they are the personified ideal of generations of crypto-Dionysians now leaping into the open.

Among the various types of today's younger generation, the hippies are the most docile conformists. Unable to generate a thought of their own, they have accepted the philosophical beliefs of their elders as unchallengeable dogma-as, in earlier generations, the weakest among the young conformed to the fundamentalist view of the Bible.

The hippies were taught by their parents, their neighbors, their tabloids and their college professors that faith, instinct and emotion are superior to reason - and they obeyed. They were taught that material concerns are evil, the the State or the Lord will provide, that the Lilies of the Field do not toil-and they obeyed. They were taught that love, indiscriminate love, for one's fellow-men is the highest virtue-and they obeyed. They were taught that the merging of one's self with a herd, a tribe or a community is the noblest way for men to live- and they obeyed.

There isn't a single principle of the Establishment which they do not share-there isn't a belief which they have not accepted.

When they discovered that this philosophy did not work-because, in fact, it cannot work-the hippies had neither the wit nor the courage to challenge it; they found instead an outlet for their impotent frustration by accusing their elders of hypocrisy-as if hypocrisy were the only obstacle to the realization of their ideals. And-left blindly, helplessly lobotomized in the face of an inexplicable reality that is not amenable to their feelings -they have no recourse but to the shouting of obscenities at anything that frustrates their whims, at men or at a rainy sky, indiscriminately, with no concept of the difference.

It is typical of today's culture that these exponents of seething, raging hostility are taken as advocates of love.

Avowed anti-materialists whose only manifestation of rebellion and of individualism takes the material form of the clothes they choose to wear, are a pretty ridiculous spectacle. Of any type of nonconformity, this is the easiest to practice, and the safest.

But even in this issue, there is a special psychological component: observe the hippies choice of clothing. It is not intended to make them look attractive, but to make them look grotesque. It is not intended to evoke admiration but to evoke mockery and pity. One does not make oneself look like a caricature unless one intends one's appearance to plead: Please don't take me seriously.

And there is a kind of malicious wink, a contemptuous sneer, in the public voices acclaiming the hippies as heroes.

This what I would call the "court-jester premise." The jester at the court of an absolute monarch was permitted to say anything and to insult anyone, even his master, because the jester had assumed the role of a fool, had abdicated any claim to personal dignity and was using self-abasement as his protection.

The hippies are a desperate herd looking for a master, to be taken over by anyone; anyone who would tell them how to live, without demanding the effort of thinking. Theirs is the mentality ready for a Fuhrer.

The hippies are the living demonstration of what it means to give up reason and to rely on one's primeval "instincts", "urges", "intuitions"-and whims. With such tools, they are unable to grasp even what is needed to satisfy their wishes-for example, the wish to have a festival. Where would they be without the charity of the local 'squares' who fed them? Where would they be without the fifty doctors, rushed from New York to save their lives-without the automobiles that brought them to the festival-without the soda pop and beer they substituted for water-without the helicopter that brought the entertainers-without all the achievements of the technological civilization they denounce? Left to their own devices, they literally didn't know enough to come in out of the rain."

Their hysterical incantations of worship of the "now" were sincere: the immediate moment is all that exists for the perceptual-level, concrete-bound, animal-like mentality; to grasp "tomorrow" is an enormous abstraction, an intellectual feat open only to the conceptual (i.e., the rational) level of consciousness.

And how can one desire or feel? The obvious truth is that these Dionysian desire-worshippers do not really desire anything. ...All of them are looking desperately for somebody who will provide them with something they will be able to enjoy or desire. Desires too are a product of the conceptual faculty.

But there is one emotion which the hippies do experience intensely: chronic fear. If you have seen any of them on television, you have seen it leaping at you from the screen. Fear is their brand, their hallmark; fear is the special vibration by which they claim to recognize one another.

I have mentioned the nature of the bond uniting the admirers of Apollo 11: the brotherhood of values. The hippies, too, have a brotherhood, but of a different kind: it is the brotherhood of fear.

It is fear that drives them to seek the warmth, the protection, the "safety" of a herd. When they speak of merging their selves into a "greater whole," it is their fear that they hope to drown in the undemanding waves of unfastidious human bodies. And what they hope to fish out of that pool is the momentary illusion of an unearned personal significance.

Monday, April 21, 2008

If you are trying to eliminate the effects of a particular problem, do you think it would ever help to understand the causes that give rise to the effects? For example, if a building were on fire, do you think it would help that the firemen in charge understood what tends to fuel a fire and what tends to extinguish it? If they did not understand the causes, wouldn't they be as likely to throw a ham sandwich on the fire as to pour water upon it? For another example, recall that doctors used to "bleed" their patients, reasoning that less blood slows infection or in earlier times that it would release the evil spirits from the body. Obviously, if one does not understand the causes, the solution may actually be worse than the problem itself. At best, the supposed solution can only mitigate or eliminate effects through random chance.

So, let's say you are concerned that the price of gasoline is going up. Or, perhaps you are concerned about the rising cost of health care, education, or food. Maybe you are concerned about the declining value of your home and the fact that your mortgage payment has increased due to higher interest rates. Perhaps you are concerned that you may become the victim of a terrorist bombing or a random gang shooting. Perhaps you are concerned that you may literally roast to death in an Al Gore-ish global warming apocalypse or be drowned in a pile of aluminum cans if they are not recycled in time. The point is that all of these issues whether real or theorized must have causes if they are to have effects. Therefore, the first step in understanding how to deal with them must be to understand their causes.

This all seems absurdly obvious, right? Yet, is this how modern intellectuals and politicians approach problems?

Before offering a health care solution, does Hillary Clinton (or any of the others) offer an explanation as to why health care costs are rising? When Obama goes on national television to discuss high gasoline prices and proposes a windfall profit tax on oil companies, does he first offer an explanation of why gas prices are rising and explain how a windfall profit tax on oil companies will reduce oil prices? When John McCain blames the mortgage "crisis" on"greedy Wall Street Bankers" does he explain the causes of the mortgage crisis and explain how the "greed" of Wall Street Bankers has caused the current situation? Given that they do not understand the causes of these "crises", isn't likely that their proposed solutions may indeed make the problems worse just as a doctor bleeding his patient only exacerbates disease?

At a more fundamental level, does anyone discuss exactly what the role of the government should be in a free society? Wouldn't such a discussion not only involve the purpose of government but consequently the nature and meaning of individual rights which defines and delimits the power of the state? Wouldn't that discussion be predicated upon an understanding of the essential nature of man and the purpose of our existence? Shouldn't the discussion be not "what is the government going to do about this and this problem" but "is this really a problem", "what is the cause of this problem", "should the government have any role at all" and "what exactly is that role"?

Rather than treating each "crisis" as an isolated concrete, shouldn't we see problems as particular instances of a more abstract problem, i.e., shouldn't we think in principle? Why do prices rise or fall, or, indeed, why do they change at all? Today's intellectuals deal with increasing gas prices as an isolated phenomenon, then put a committee on to studying why food prices are increasing, and then move them on to studying why health care costs are rising. Gang violence is treated by today's intellectuals as an intractable societal ill. Among other things, shouldn't we draw a comparison between the outrageous violence that occured during Prohibition when a lucrative black market developed around alcohol bootlegging and the gang violence we see today centered around the narcotics trade? Today's intelletuals debate endlessly about what we should do in the Middle East as if we have never had conflicts with other nations. Shouldn't we study history for examples of similar military conflicts to the ones in which we find ourselves today for lessons on how to proceed and attempt to abstract some general principles of foreign policy? For example, shouldn't we study the American occupation of Japan after World War II which turned a fanatically religious culture into a productive and peaceful ally? Could you imagine any political candidate today actually referencing history much less articulating principles upon which to base their actions? I literally can not imagine this occuring.

The reason it is difficult to imagine today is that this approach would require people to think in principle. It would require making generalizations from observation. In other words, it would require reason. If you think the problem in America or the world today is increasing prices, gang violence, terrorism, etc. you are wrong. The problem is the unwillingness of modern intellectuals to think in principle. They have been trained by their professors to believe that reason is not absolute. They have been trained to believe that morality is subjective and there is no right and wrong. They have been taught that every culture is equal. There are no black and whites. And on and on. This culture of unreason seeps into every aspect of our culture especially politics.

Read any of the candidates' positions on their websites. They usually have some meaningless bromide on their banner such as "hope for change" or "change for hope" or "making America better through hope for change", etc. Then they have a litany of positions statements on every conceivable issue. Obama's website has position links as follows: civil rights, disabilities, economy, education, energy and environment, ethics, faith, family, fiscal, foreign policy, healthcare, homeland security, immigration, Iraq, poverty, rural, service, seniors and social security, technology, urban policy, veterans, and if that's not enough a category called "additional issues". Not only is each issue treated as a disconnected concrete but even within categories there are sub-concretes. For example, notice that there is category for "Iraq" separate from "foreign policy" and a category for "economy" separate from "fiscal". Apparently, "ethics", "faith", and "family" are all separate from one another.

Despite the absence of any explicit reference to principles, there is one principle implicit in all of the candidates campaign platforms. It is the principle that the government should have unlimited control over your life and property. It is the principle that the omnipotent government should redistribute the earnings of the productive to the non-productive. It is the principle that the government should protect you from yourself - that it regulate your children's education, your food, your medicine, with whom you trade, what you produce, when you can produce it, who you employ, how much you can charge, where you can work, what you can do with your property, what you are allowed to read or watch, with whom you can bank, and what currency you are allowed to trade. All that distinguishes them is the degree to which they wish to control any particular aspect. Wendell Phillips said "Eternal vigilance is the price of liberty." An uneducated populace unable and unwilling to think in principle can not be vigilant about who should be America's Next Top Model much less about an abstract concept like liberty.

We are in trouble.

p.s. It's ironic to me that the government demands that practically every profession in America be licensed, i.e., meet the dictates of some arbitrary government standard that allegedly deems one to be qualified in their individual occupation. I oppose all forms of licensing, but the fact is that licensing today is required not only of doctors and lawyers but even stock brokers and cosmetologists. Yet, what are the qualifications of those running for president of the United States or congress? Here we have persons seeking to be in positions of immense power not only to command the armed forces and to enforce criminal law but in today's culture to dictate the minutia of practically every activity that takes place in our lives. If my barber has to be licensed to cut my hair, shouldn't Hillary Clinton have to pass some sort of test if she wants the ability to steal my money and give it to others?

Saturday, April 19, 2008

Expelled Gets an FApril 18, 2008Irvine, CA--Today Ben Stein's anti-evolution documentary, Expelled: No Intelligence Allowed, opens in theaters. The film claims that advocates of "intelligent design"--the view that life is so complex it must be the product of a "higher intelligence"--are the persecuted victims of a "scientific establishment" dogmatically committed to evolution."

The premise of Expelled is that proponents of 'intelligent design' have been shunned, denied tenure, and even fired because of a conspiracy to quash the scientific evidence supporting their theory," said Dr. Keith Lockitch, resident fellow at the Ayn Rand Institute. "But the truth is: there is no evidence supporting their theory. Intelligent design is completely devoid of any positive scientific content, and consists of nothing more than a religiously motivated attack on evolution. To the extent intelligent design advocates are facing obstacles in academia it is because they are not doing real science: they haven't been 'expelled' they have flunked out of the scientific community, just as a faith healer would flunk out of medical school."

Observe that intelligent design advocates have pumped millions into publicity-seeking, rather than appealing to scientists with facts and logical arguments. They have spent more time at Christian 'apologetics seminars' than scientific conferences, and have attempted to use the courts to force schools to teach their ideas. Now they are hoping to dupe the movie-going public with a film that misrepresents Darwin's theory and the array of facts that support it--just as the makers of Expelled misrepresented the nature of the film in order to bamboozle respected evolutionary scientists into participating in it."

Intelligent design advocates will do anything to advance their views--except science."

The reason for that is simple: doing science has never been their goal. Their goal is to make biblical creationism appear scientific in order to skirt the constitutional ban on religion in public schools. Contrary to the film's claims, the real dogmatists are not the defenders of Darwin, but the religiously motivated advocates of intelligent design."

Thursday, April 17, 2008

"Imagine reasserting ourselves as rational, sovereign individuals, whose rights to life, liberty and the pursuit of happiness include the right to choose values without asking society's permission--and without chasing our own money, like lab rats sniffing cheese, down the twisting corridors of a labyrinthine tax code."

Wednesday, April 16, 2008

The name "Jimmy Carter" has reached a rare level in my consciousness. It is a name that, for me, instantly provokes a visceral sense of disgust and apprehension similar to the reaction caused by the names: Hillary Clinton, Barbara Streisand, or Jane Fonda. I groan when I see a picture of him or see a headline with his name. His presidency and persona is rightly associated with a general aura of malaise, and he exudes a kind of mushy, self-righteous, amorality. Then, whenever you think he has been discarded into the trash heap of left-wing imbecility, he surfaces, like a pesky apparition to taunt you with his latest outrage.

Well, he's back. This time, it's to flagrantly violate one of the few principled stands taken by the current administration: the policy of not meeting with Hamas, the anti-semitic Palestinian terrorist organization, mainly funded by Iran and Saudi Arabia, whose charter calls for the destruction of the State of Israel through armed Jihad and which stands responsible for thousands of murders throughout Israel since the 1990s by suicide attack, artillery, shootings, etc. In 2006, Hamas called for Muslim attacks on American targets throughout the world due to our support of Israel. Despite this, Carter has said that it is necessary to "reach out" to groups like Hamas. Worst of all, it turns out that the Carter Center actually receives taxpayer funds - some $19 million since 2001. Fortunately, his activities are causing somewhat of a backlash and apparently even democrats are expressing outrage:

Also Wednesday, Reps. Howard Berman, D-Calif., who is chairman of the House Foreign Affairs Committee, and Gary Ackerman, D-N.Y., chairman of the Foreign Affairs Mideast subcommittee, wrote Carter imploring him not to meet with any more Hamas officials.

"[T]his visit will undermine the Middle East peace process and damage the credibility of Palestinian moderates," they wrote, adding that the "legitimacy and prestige that Hamas will derive from your visit will be seen in the region as a clear demonstration that violence pays."

I am not a legal expert but wikipedia quotes a legal dictionary definition of treason as "...[a]...citizen's actions to help a foreign government overthrow, make war against, or seriously injure the [parent nation]." Carter is meeting with an avowed enemy of the U.S. and its allies during wartime in direct opposition to a rational policy to not negotiate with terrorists. Furthermore, he is aiding and abetting the enemy by granting them "legitimacy and prestige" which will only embolden them and their financial supporters. How is this not helping a foreign government to make war against or seriously injure the U.S.?

In addition to Carter's diplomatic fiascos, he is a member of a group called The Elders which is comprised of thirteen noted socialists such as Nelson Mandela and Kofi Annan that advocates for world government or a "Global Village" as their website claims. They also have posted the Universal Declaration of Human Rights which is the declaration adopted by the United Nations general assembly in 1948. This declaration is a hodgepodge of socialist nonsense. (My favorite is Article 26 which declares that education shall be "free" and "compulsory" although they do not make clear who will be compelled to teach or who will be compelled to pay the teachers.)

If Carter is conducting foreign policy meetings with our military enemy in direct violation of U.S. policy under the auspices of a foreign organization which seeks usurpation of the U.S. Constitution and Declaration of Independence in favor of the United Nations charter, I submit that his actions should be under consideration for treason.

Monday, April 14, 2008

Apparently, Bush is giving $200M of American taxpayer money to non-taxpayers in foreign countries so they can buy food. If Americans want to voluntarily send money to other countries that is their right, but the government has no business stealing money from us and then giving to other countries.

But, if the government is going to steal my money and give it to others then at least do it right. Instead of sending cash or even food, how about sending them $200M worth of books on freedom and capitalism. How about sending The Declaration of Independence and the U.S. Constitution, Adam Smith, David Ricardo, Bastiat, Von Mises, Ayn Rand, and Reisman. If any of these countries were to follow the teachings of these writers they could create the greatest economic power in world history. Besides, if America continues to collapse we will need somewhere to go.

Recall in my post Warm Weather Causes Terrorism?, I discussed various modern intellectuals, viz., Sir Crispin Tickell (love writing that name), Professor of 'Peace Studies' Paul Rogers, and even Osama Bid Laden who were claiming that global warming would lead to terrorism since desertification and rising sea levels (not making that up) would lead to food shortages and chaos in third world countries which then would lead them to terrorism etc. Yet, ironically, the above article quotes policy makers at the IMF and World Bank who have now "singled out U.S. policies pushing corn-based ethanol and other biofuels as deepening the woes" since it is believed that the biofuels are diverting production from corn (uh, food). Didn't the U.S. government push biofuels to reduce our dependence on the dreaded fossil fuels to prevent global warming (excuse me, "climate change" as evidence shows the earth is not warming) and the alleged apocalypse forecasted by Nobel Prize winner Al Gore? Yet, those policies are helping to drive the cost of food higher and leading to chaos. Hmmm.

Of course, we know the diversion of crop usage is only part of the problem. The core problem rests in the government's control of the money supply through the Federal Reserve system as I discussed in my last post. The government's inflation of the money supply is leading to increasing prices everywhere.

So, what is the solution? Is it elimination of world central banks and a return to private banking and a gold standard to end global inflation? Is it removing statist policies that encourage the production of biofuels? Is it encouraging and supporting third world countries to adopt free market policies like protecting individual property rights and contracts to attract foreign investment and trade with wealthier nations so that they become first world countries? Is it removing price controls and export restrictions to encourage supplies to go where they are most needed? In short, isn't the solution laissez-faire capitalism? Afterall, were there food riots in Las Vegas this week since it is located in a desert? For some reason, there is plenty of food in semi-capitalist desert cities, but there is no food in corrupt, despotic desert countries. Might there be a connection?

So what do the brilliant policy makers at the IMF and World Bank think is the solution?

"The World Bank plans to nearly double its agricutlutral lending to Africa next year to 800 million, and is urging members to ramp up relief for hard-pressed nations. "

And where will the World Bank get this money? Of course, the governments that contribute are those who tax people's earnings then give it to the World Bank who then gives it away to people who haven't earned it and who can't pay it back (not to mention the fact that most of these loans are stolen by corrupt government officials). And when there is not enough tax dollars, how does the U.S. fund its budget deficit? It funds it through government securities which are purchased by the Federal Reserve Bank with money that it creates out of thin air which leads to inflation and higher prices for everything thus necessitating more loans to developing countries who can't afford anything ad infinitum. Does a system where bizarre government policies that affect production and debase the currency through statist monetary intervention all to fund more government intrusion into the lives of everyone sound like laissez-faire to you? Well, if you work for Time magazine it certainly does. Quoting Tony Karon from the above link:

The social theories of Karl Marx were long ago discarded as of little value, even to revolutionaries. But he did warn that capitalism had a tendency to generate its own crises. Indeed, the spread of capitalism, and its accelerated industrialization and wealth-creation, may have fomented the food-inflation crisis - by dramatically accelerating competition for scarce resources. The rapid industrialization of China and India over the past two decades - and the resultant growth of a new middle class fast approaching the size of America's - has driven demand for oil toward the limits of global supply capacity. That has pushed oil prices to levels five times what they were in the mid 1990s, which has also raised pressure on food prices by driving up agricultural costs and by prompting the substitution of biofuel crops for edible ones on scarce farmland. Moreover, those new middle class people are eating a lot better than their parents did - particularly more meat. Producing a single calorie of beef can, by some estimates, require eight or more calories of grain feed, and expanded meat consumption therefore has a multiplier effect on demand for grains. Throw in climate disasters such as the Australian drought and recent rice crop failures, and you have food inflation spiraling so fast that even the U.N. agency created to feed people in emergencies is warning that it lacks the funds to fulfill its mandate.

The reason officials such as Zoellick are sounding the alarm may be that the food crisis, and its attendant political risks, are not likely to be resolved or contained by the laissez-faire operation of capitalism's market forces. Government intervention on behalf of the poor - so out of fashion during globalization's roaring '90s and the current decade - may be about to make a comeback.

Putting aside all of the bizarre contradictions of this last quote let me just summarize his point: it's all capitalism's fault and the solution is Karl Marx and more government intervention. The definition of insanity is "a relatively permanent disorder of the mind". Those that think the worlds' problems are a consequence of capitalism and look to Marx for solutions can no longer be dismissed as simply making an honest error. I submit that given the overwhelming evidence and facts against this position, one would have to literally be insane to advocate it.

Saturday, April 12, 2008

"Inflation is back. After several years of relative stability, a wave of rising pries is washing over the world economy.

"Some of the factors driving inflation vary from country to country; union-negotiated wage hikes in Germany, pork shortages in China, an electricity squeeze in South Africa, pay rises for civil servants in India.

The author, Andrew Batson, goes on to cite anecdotal evidence from around the world demonstrating that prices are generally rising. He attributes this to everything from crop usage for alternative energy, to increasing demand from China and developing countries, to the weakening US Dollar, to increased economic "globalization". Lo and behold, he even cites "years of easy credit earlier this decade-the result of a global quest to avoid falling prices, or defation" to be "a contributing factor."

After discussing "pricey cab rides" in California, German wage gains, and even increasing food prices for nomadic herders on "Mongolia's steppes", he concludes partially that "Central banks, especially the Fed, are hoping that slowing growth in the U.S. and Europe will ease inflationary pressures globally, especially when fast-growing emerging economies begin to feel the slowdown's pain."

This article, which appears on the front page of the most important business periodical in the world, betrays complete ignorance of the nature, cause, and even meaning of inflation. Furthermore, should we be concerned if not outraged that our own Fed is "hoping" for "slowing growth"? It doesn't surprise me that the average American knows little about the meaning or nature of inflation but it is shocking that an economics reporter from the Wall Street Journal, policy makers at the Fed, and all the other various "experts" we see trotted out in the mainstream media could be so ignorant. This appalling article is testament to the sorry state of modern economics and to social sciences in general (which I discussed previously in my post Reality Strikes).

Here is a very simple example which serves to illustrate a few key points. Say you have $100 in your pocket to spend on various things. And let's say, for example, that you really need to buy some Chinese pork. Let's also say that pork is in really short supply so its price suddenly goes up to $100 per piece of pork. That means that all of your money must be spent on pork but you now have no money to spend on other things. Consequently, there would be less demand for non-pork items and the price of non-pork items would tend to decrease. In other words, a decreased supply of one commodity (which tends to increase its price) cannot cause a general price increase of all commodities as it tends to be offset by falling prices elsewhere.

What could cause a general price increase across all commodities? Let's say that the supply of money was rapidly increased. The increase in the supply of money would increase demand for all things. You could suddenly buy the more expensive pork and you would have money to buy other things. This increased aggregate demand would tend to increase the price of every commodity as the newly created money is spent and respent. A further effect is that if the supply of money continually increases it causes people to tend to want to hold smaller money balances which accelerates price increases even further.

When people discuss inflation they typically have in mind the idea of generally increasing prices. However, inflation should not be thought of as "increasing prices" nor should deflation be thought of as "decreasing prices." To do so, it to mistake the symptom for the cause. Quoting The Government Against the Economy (p. 2-3) by George Reisman:

"Rising prices are merely a leading symptom of inflation, not the phenomenon itself. Inflation can exist, and , indeed , accelerate, even though this particular sympton is prevented from appearing. Inflation itself is not rising prices, but an unduly large increase in the quantity of money, caused, almost invariably, by the government. In fact, a good definition would be : an increase in the quantity of money caused by the government. A virtually equivalent definition would be: an increase in the quantity of money in excess of the rate of which a gold or silver money would increase. These two definitions are virtually equivalent, because without government interference in money over the course of our history, the supply of money today would consist mainly or even entirely of precious metals and fully backed claims to precious metals. The increase in the supply of such a money would almost always be quite small and at all times would be severely limited by the high costs of mining additional quantities of the precious metals. Rising prices as a chronic social prolem are a consequence of governments overthrowing the use of gold and silver as money and putting in their place unbacked paper currencies and checking deposits whose quantity can be increased without limit and virtually without cost."

Therefore, when Mr. Batson was discussing price increases throughout the world, he was simply citing symptoms of inflation not elucidating their cause. Wage rate increases, food price increases, energy price increases, a weakening dollar, are all effects of the government's inflation of the money supply. The government accomplishes this increase in money through the Federal Reserve. When the Federal Reserve lowers interest rates it means it sets the target for the Federal Funds rate (the overnight rate that banks charge each other for loans) lower. It accomplishes this by buying government securities on the open market. The trick is that when the Federal Reserve buys the securities, it pays for the securities with money it creates (it simply puts an electronic entry in its computer system stating that the member bank now has the money). The Federal Reserve can attempt to control the money supply in this way by increasing reserves (buying securities with fake money) or decreasing reserves (selling securities to take money out which it practically never does). Data shows that the government has been rapidly increasing the money supply for the last several years. This has had the effect of causing price increases in the U.S. and around the world.

Another (Keynesian) fallacy that is implied in the article is the belief that slowing the economy will relieve inflationary pressures. The economy is slowing now and is in a recession yet prices are everywhere increasing. One of the causes of this slowdown is inflation. Inflation destroys capital in myriad ways including inducing malinvestment as we have observed with the housing crisis. As I mentioned above, it also causes individuals and firms to hold smaller money balances as credit is made easily available. When the government stops or dramatically slows the inflation, many investments are seen to be malinvestments. If this effect is widespread (as it has been with housing) then these firms must begin to rebuild their cash holdings. Firms that were actually lenders of funds may now actually become seekers of funds as the leverage unwinds. In other words, the entire economy gets a margin call. This generally leads to widespread bankruptcies and unemployment as we are now witnessing.

The idea that economic growth and price increases are necessarily related and vice versa is absurd. Under a gold standard, the economy could grow dramatically and prices in real terms would tend to decrease. This is because production in other industries tends to be similar or greater to the production and mining of precious metals. The author of this article would deride this phenomenon as "deflation" however decreasing prices if not combined with unemployment and widespread bankrupticies is equivalent to getting richer as Dr. Reisman points out in his post Deflation and the Gold Standard. If your dollar can buy more stuff (because everything is going down in price) then you are getting rich even if the amount of dollars you own is the same. Consider computer prices. It is well known that computer prices have decreased dramatically, i.e., you can buy way more computer for the same or less money than you could years ago. This means you are richer in terms of computers. It is productivity that makes us rich not necessarily the amount of "dollars" you hold. If you had a billion dollars 30,000 years ago would you have considered yourself rich? Productivity means that goods and services can be made available for less effort. This is what really increases our standard of living. In this way, a poor person in the U.S. today lives better than most kings a hundred years ago.

In a previous post "Wishing for Non A", I discussed Ayn Rand's idea that all the evil in the world at root is caused by people who desire reality to not be what it is. Well, here we go again. Inflation is based on the idea that all you have to do is create paper money and somehow this will make everyone richer. It is an attempt to contradict the laws of nature. Production is the basis of wealth. Money represents wealth, it does not cause it. Furthermore, it is this contradiction that leads to the Fed bankers "hoping" for "slowing growth." If you believe that economic growth somehow causes price increases, then you will be led into the grotesquely evil position of wishing that the economy slows down to stop prices from increasing. There is no reason why the economy cannot continue to grow indefinitely without boom-bust cycles. If human beings produce more wealth why wouldn't our standard of living continually increase without interruption? All we need is money that is real, i.e., precious metals, that is not subject to artifical increases and decreases by our ingenious government masters.

Wednesday, April 9, 2008

More and more I am reading the idiotic and contradictory claim that the current economic crisis is the fault of "laissez-faire" policies or a lax regulatory environment which led to mortgage bankers making bad loans. Quoting this WSJ link :

The prevailing view among critics faults Mr. Greenspan on two main counts.

First, they say, his Fed lowered rates too much from 2001 to 2003 to cushion the economy from the bursting dotcom bubble. Then it took too long to raise them again. Low rates fueled mortgage borrowing, driving home prices to unsustainable heights.

Second, they say, the Fed was lax in its regulatory role. The central bank failed to press for stiffer rules for underwriting mortgages to people who ultimately couldn't afford them, they say. Also, they say, the Fed failed to anticipate banks' exposure to risky home buyers, leaving them with too little capital to absorb the eventual losses on those mortgages.

At the time, Mr. Greenspan expected his policy to boost housing because the rest of the economy was relatively unresponsive to lower interest rates. Based on decades of his own research, he believed a buoyant housing market would spur consumers to borrow against home values and spend more. This would not produce a housing bubble, he predicted, because it was difficult to speculate in homes and the memory of the 2000 tech-stock bust remained fresh.

First, the fundamental problem lies in the nature of central banking per se. If the government has the power to create money out of thin air to fund its deficits and avoid the political pain of raising the taxes necessary to pay for its bloated expenditures then it will do so. The process of rapidly inflating the money supply relative to increases in precious metal supplies tends to cause an increase in the price of everything. In this case, as the prices of houses went up, it fueled the belief that the trend would continue indefinitely and led to a proverbial bubble in house prices. The government eager to avoid a Latin American style hyper inflation must turn off the inflation at some point which leads to a credit crunch and typically to dramatic recessions or even depression as we are now witnessing. This is the well known boom-bust cycle that has been explained and understood for over one hundred years most recently and most eloquently by Dr. Reisman.

The idea that the government should have "anticipated banks' exposure" to housing and imposed stiffer regulations on mortgage underwriters is absurd. If the entire housing and financial industry which is comprised of millions of individuals who stood to lose hundreds of billions of dollars did not anticipate these risks then how should the Supreme Dictator of Financial Regulation have anticipated these risks? Who didn't believe housing would continue to go up in price at the time? If housing prices had continued to go up and mortgage originators had continued to reap huge (dollar) profits and credit was being made easily available through low interest rates and the government continued to pose as the ultimate underwriter then a financial company would have been assailed by its shareholders for not having participated. This is precisely what inflation does. It creates bizarre distortions in the perceived profitability of various economic sectors and leads to malinvestment. It is only in hindsight (when the inflation is stopped) that many investments are recognized to be disasters. Recall that this phenomenon occurred during the stock market bubble. At the time, the market "seemed" high but many went bankrupt trying to short it. Then many who were long went bankrupt as the market plummeted. The malinvestments which take years to unwind represent an enormous destruction of capital which has real effects on our economy and standard of living.

Furthermore, ironically, to the extent that the mortgage industry would have denied loans to risky customers they would have been charged as "greedy", "miserly", and "heartless" bankers who don't care about the little guy and are only out to make a buck. In fact, historically the government has used its powers to either force banks to make loans to these types of customers and/or to underwrite them through its intermediary agencies like Fannie Mae and Freddie Mac. Far from "laissez-faire", the government's own regulatory policies contribute to the problem by creating "moral hazard" or creating a situation where businessmen have incentives to take greater risks since they reap the gains but are shielded from the consequences of those risks.

So, when these mortgage bankers awash in paper dollars pumped into the banking system by the Federal Reserve finally go on an orgy of lending to everyone and their brother without much regard to the underlying credit quality of the borrower (since the belief was that homes used as collateral would continue to go up in price) were they lauded for their benevolence at bringing home ownership within the grasp of the heretofore have-nots? No, of course not. The banks are assailed as being "greedy" and somehow responsible for screwing all of these people who got money from the banks which they do not have to pay back!? In other words, they were greedy for not lending and now are greedy for lending too much. Which is it? In fact, many of these banks are now failing and writing off hundreds of billions of dollars in losses. In what sense can someone who makes loans to people who don't pay them back be considered greedy?

Say a drug addict comes to you begging for money. So you give him the loan which he predictably doesn't pay back, so you take something of his to recover some of the losses. Should the drug addict be mad at you for having lent him the money?!!! Shouldn't it be the other way around? Shouldn't the banks be howling at all of these people who took out loans and aren't paying them back?

More ironically, the solution is certainly not more government regulation nor is it appointing a Financial Dictator who will somehow discern a future that millions of brilliant people with money at stake somehow cannot. The solution is to eliminate regulations discouraging bankers from taking risks and eliminating policies encouraging bankers to take added risk, with the proviso that the government will not be the lender of last resort and that those who enter voluntarily into financial contracts will bear the consequences of those contracts. Those with financial interest in the banks such as their depositors, shareholders, and insurers are responsible for their own actions and must act accordingly. Furthermore, it is high time we completely dismantle the Federal Reserve System and return to a 100% reserve gold standard and private banking along the lines detailed by Dr. Reisman and stop the boom-bust cycle once and for all.

Tuesday, April 8, 2008

Apparently, the New York government is confused about how to fund its mass transit program. Democrats in the state are proposing a "millionaire's tax" to fund the shortfall:

Under the plan, people who earn over $1 million in New York state will pay an income tax surcharge of about 3/4 of 1 percent for five years. In all, it would raise over $5 billion for mass transit. Supporters say that of the 75,000 affected taxpayers, about 35,000 don't live in New York.

Of course, commuters are "thrilled" with the idea of using the coercive power of the state to steal money from other people to fund their personal travel needs. But the government remains confused, and MTA Chairman Patterson has even announced the formation of a "blue ribbon commission."

I have formed a blue ribbon commission in my kitchen and have come up with the following plan: charge higher prices to the people who use mass transit.

Saturday, April 5, 2008

In a recent post, I decried the recent California judicial ruling that effectively outlawed homeschooling in the state. Here is a link to an excellent op-ed by Thomas A. Bowden, "Your Child Is Not State Property". Mr. Bowden writes:

Government has no such right. Neither the state nor "society as a whole" has any interests of its own in your child's education. A society is only a group of individuals, and the government's only legitimate function is to protect the individual rights of its citizens, including yours and your children's, against physical force and fraud. The state is your agent, not a separate entity with interests that can override your rights.

If Justice Croskey's description of California law is correct, then the state's educational policy is at odds with America's founding principles. Parents are sovereign individuals whose right to life, liberty, and the pursuit of happiness includes the right to control their child's upbringing. Other citizens, however numerous or politically powerful, have no moral right to substitute their views on child-raising for those of the father and mother who created that child.

Instead, a proper legal system recognizes and protects parents' moral right to pursue the personal rewards and joys of child-raising. At every stage, you have a right to set your own standards and act on them without government permission. This parental right to control your child's upbringing includes the right to manage his education, by choosing an appropriate school or personally educating him at home.

Mr. Bowden wonders aloud if the current controversy might call into question the moral foundations of public education. Given the state of our culture, I doubt any generalizations will be drawn from the case, but Mr. Bowden does draw the proper conclusion:

For their part, the defenders of public schooling can be expected to stay busy papering over their system's own failures--the very failures that helped fuel the homeschooling movement, by driving desperate parents to seek refuge at home from the irrationality, violence, and mediocrity that have come to characterize government education, in California and elsewhere.

For now, at least, the battle lines are clearly drawn. Are parents mere drudges whose social duty is to feed and house their spawn between mandatory indoctrination sessions at government-approved schools? Or are they sovereign individuals whose right to guide their children's development the state may not infringe?

The answer could determine not only the future of homeschooling but the future of education in America.

Tuesday, April 1, 2008

On April Fool's Day, the biggest joke of all is being played on American families by Big Oil," Rep. Edward Markey, D-Mass., said as his committee began hearing from the oil company executives.

With motorists paying a national average of $3.29 a gallon at the pump and global oil prices remaining above $100 a barrel, the executives were hard pressed by lawmakers to defend their profits.

"The anger level is rising significantly," said Rep. Emanuel Cleaver, D-Mo., relating what he had heard in his district during the recent two-week congressional recess.

Yet, in a recent post , I quoted democratic congressman, John Dingell, who was proposing a 50 cent gasoline tax to reduce American consumption allegedly to stem the ever dreaded carbon emissions! So, apparently here is the message from the US government to the oil industry which echoes my previous post Probe of Probes:

* We want cheap gasoline* But, we want gasoline to be more expensive so people don't buy as much and create "global warming"* We want cheap gasoline* But, we want to continue to pass legislation and directives that create uncertainty over bio-fuels and delays or prevents the construction of new refineries* We want cheap gasoline* But, we don't want you to put up new refineries or expand existing refineries because that will hurt the environment* We want cheap gasoline* But, we will continue the current federal gas tax on gasoline* We want cheap gasoline* But, we want to inflate the money supply to fund our deficits, bail out banks, and create the illusion of prosperity even though it will dramatically increase the price of everything including gasoline and the fact that gold and every other commodity has nearly tripled in the last few years should have nothing to do with the price of crude oil* We want cheap gasoline* But, we will not let you drill in North America or in the ocean because that will hurt the environment so instead you must import raw crude from corrupt and dangerous foreign countries which use the money to fund radicals who terrorize us so that we have to spend money and lives to fight against them and, oh, if they nationalize your investment and property we will do nothing, so good luck* We want cheap gasoline* But, we will not allow roads or rail to be privatized nor will we increase the amount of roads thus increasing demand for gasoline as people sit idled in traffic and at inefficient government stop lights* We want cheap gasoline* But, instead of spending your profits on more exploration we want you to spend it on alternative energy projects like wind and solar thus reducing your expenditures on creating a greater supply of gasoline* We want cheap gasoline* But we will continue to impose tariffs on imported gasoline* We want cheap gasoline* But we will continue to tax every aspect of the production process* We want cheap gasoline* But, if its too cheap and you start losing money and your share price plummets, then we will prosecute you for "defrauding" shareholders and endorse class action lawsuits against you for fraud, negligence, and not performing your fiduciary duty to your investors* "SO, CHEAP or EXPENSIVE GASOLINE, NOW, OR ELSE!"

Quote of the Month

“We are fast approaching the stage of the ultimate inversion: the stage where the government is free to do anything it pleases, while the citizens may act only by permission; which is the stage of the darkest periods of human history, the stage of rule by brute force.” -- Ayn Rand